The ever increasing demand on top quality solid biofuel in form of biopellets is limited by the sources and properties of raw materials. The best quality biopellets are suitable for burning in small scale boilers up to 100 kWt. The most limiting factor of this fuel is the ash melting temperature. Therefore the use of cheaper and readily available phytomass as a raw material is considerably restrictive. The research in this paper is based on the theory of the chemical process of ash creation and on the effect of additives on this process. The objective of the study is to find and apply an effective and available additive to produce the best quality phytomass-based fuel pellets, suitable for small scale boilers. A by-product of the paper recycling process, papermaking sludge was used as the most effective additive to wheat straw. This is due to the high content of calcite and kaolin in the sludge. It was also confirmed by experiments that the composition of sludge including cellulose fibres very positively affects the physical and mechanical properties of the composite pellets. Our research deals with an experiment concerning an appropriate production process of composite fuel based on wheat straw. Different weight proportions of papermaking sludge were added and the effect of the sludge on the fuel parameters, especially on the ash melting behaviour, was observed. The final quality of the composite fuel was thoroughly tested by physical, mechanical and thermal methods, and its properties were compared to European and International Standards for Biofuels. The results of the experiments demonstrate that the composite pellets produced by the above-mentioned process have a high level of fuel quality and, due to high ash melting temperature, they are suitable for small scale boilers. The results have shown that the appropriate range of papermaking sludge content for producing high quality wheat straw composite pellets ranges from 10% to 20%.